VMware Licensing Hike ‘Severely Unattractive’: Partners

Effective April 2, VMware will increase its CPU licensing pricing model for customers who have more than 32 cores. VMware channel partners talk to CRN about the market impact.

VMware is doubling the cost of its CPU software licensing for customers who have more than 32 cores, a move channel partners say could affect sales and provide a boost to competitors Nutanix and Scale Computing.

“Any processor that is more than 32 cores just became severely unattractive for any VMware workload,” said one top executive from an East Coast-based solution provider, which partners with VMware that declined to be identified. “That said, we typically are going to scale out a virtual environment so we can just avoid those high core count processors for now. I don’t think this will affect the vast majority of [VMware] customers, but there will be an impact to a customer that standardized on high core count processors.”

Effective April 2, 2020, VMware is changing its per-CPU pricing model in which any software offering that VMware licenses on a pre-CPU basis, VMware will require one license for up to 32 physical cores. If a CPU has more than 32 cores, additional CPU licenses will need to be purchased.

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The change will impact data center processors with high core counts such as AMD’s EPYC Rome and Intel’s upcoming 56-core Cooper Lake models, effectively doubling the price for VMware licenses for 48-core or 64-core models. For example, if a customer has a 64-core processor, the business will need to purchase two VMware CPU licenses. VMware’s Enterprise PKS and NSX Data Center subscriptions are some examples of the products that use CPU cores as the licensing metric.

With the change, VMware customers with more than 32 cores will need to pay thousands more per socket, according to one West Coast solution provider sales executive who is a top VMware partner.

“Most of our customers that are going to be looking at workloads this high are typically using [VMware] Enterprise Plus, which depending on support, is typically $3,000 or $4,000 per socket. So that could double up,” said the sales executive who declined to be identified. “I think it’s going to make the conversation shift to, ‘If you really need that many cores, do you really want to consolidate it or do you want to spread those core counts out over multiple processors if the price for VMware licensing is not going to be effected either way?’ But there’s also other considerations. If we’re doing fewer sockets, we could be doing fewer servers. That could take into account the amount of power and cooling that we need to account for in the projects as well. There’s a lot of other factors that if we’re looking at it, this could run as much as $3,000 or $4,000 for additional CPU license that they need from VMware on the high-end.”

VMware, for its part, said changing the pricing model will give customers greater choice and have “no impact on the vast majority” of customers since they use Intel and AMD-based servers that are at or below the 32-core threshold.

“Today’s announcement is a continuation of VMware’s journey to align our product offerings to industry standard pricing models,” said VMware in a blog post on Monday. “The change moves VMware closer to the current software industry standard model of core-based pricing. This approach will make it easier for customers to compare software licensing and pricing between VMware (using per-CPU with up to 32 cores) and other vendors (using per core pricing). It also helps us keep our pricing simple and relevant to where the hardware market is going.

Joshua Lee, director of sales at VirtuIT Systems, a Nanuet, N.Y.-based Dell partner, said the change will affect roughly 10 percent of its customer base.

“Where this is going to effect things is in our current campaigns that we are running especially around the release of the AMD processors with Dell EMC,” Lee said.

Lee said VirtuIT Systems is close to winning some server business in the midmarket space. “With this change now, we’re going to have to go back – unless these orders happen before April 30 – and have conversations with customers about possibly scaling back the core counts on their CPUs because we want to make sure they stay under that threshold. Because a lot our sales cycles and our sales campaigns are based around talking to customers about reducing their overall number of sockets in their environment to help get their licensing costs under control.”

Partners also said a VMware licensing change could give competitor Nutanix new fuel to win deals when going head-to-head against VMware. Nutanix and Scale Computing did not respond for comment by press time.

“I’m a little nervous about what kind of marketing stuff Nutanix is going to come out with after this. I feel it’s going to be more ammunition for them,” said the West Coast solution provider, who is also a Nutanix partner. “We might see an uptick in Nutanix AHV, especially if you have an existing customer staring at a big bill.”

VMware is giving customers several months to prepare for the licensing cost change.

For customers who are currently deploying VMware software on CPUs with more than 32 cores, or for those that are in the process of purchasing physical servers with more than 32 cores per CPU, VMware is providing a grace period after the licensing metric change goes into effect on April 2, 2020. Any customer who purchases VMware software licenses, for deployment on a physical server with more than 32-cores per CPU, prior to April 30, 2020 will be eligible for additional free per-CPU licenses to cover the CPUs on that server.

“They’re giving customers roughly a quarter to adjust to the new model so that planned purchases aren’t going to get stalled but also so we can start planning and advising customers for projects that are going to happen in the second or third quarter of this year,” said Lee.